Honest Tea: A tiny green(tea) company goes BIG

Seth Goldman, the CEO of Honest Tea, recently came to the Smith School of Business to relate to students some of the wisdom he’s gained over the years while building his organic, health minded company from the ground up. Seth, and his Honest Tea co-founder Barry Nalebuff, have just recently published their first book on what it is to be a socially responsible entrepreneur. The book is titled “Mission in a Bottle – The Honest Guide to Doing Business Differently – and Succeeding.” The book is written in the style of a graphic novel, which makes it very easy to approach and enjoyable to read.

During Seth’s presentation to University of Maryland students and faculty, it became abundantly clear that Honest Tea has had a huge amount of success – a great sign for those of us hoping that more of the world’s businesses focus on their social impact. Every entrepreneurial story is different, but each one is inspiring in its gritty details. Too often we hear such stories ending up badly for the original founders and their ideas, which is why it was so inspiring to hear Seth Goldman speak. Every entrepreneur wants what Seth Goldman has: a business they are passionate about with an impactful purpose that goes “big,” but on their own terms.

In case you were not aware, Seth’s Maryland-based company was recently acquired by the Coca-Cola Company. You might be tempted to drop your head in shame and mourn the loss of such a local gem like Honest Tea to the clutches of the global corporate world, but luckily Honest Tea’s founders were in a unique position when Coca-Cola came knocking. Since Honest Tea’s inception in 1997, Goldman and Nalebuff have managed to keep ownership control of the company and make sure that their purpose driven enterprise stayed true along the way. So when it came time to discuss taking the next step and scaling up the business, Honest Tea was able to utilize its unique product and social purpose to attract the investment of a global beverage company. Now Honest Tea, still true to its original purpose, is 40% owned by Coca-Cola and, as a result, is able to leverage Coca-Cola’s distribution and manufacturing power to its own advantage.

If you are not familiar with Honest Tea, here’s a brief rundown. Seth along with Barry Nalebuff, who was once Seth’s business school professor at Yale, started the company after noticing a pretty drastic product opening in the beverage market. At the time there were plenty of carbonated, overly sugary drinks available for purchase but nothing “normal,” and good for you. As Seth put it during his presentation to University of Maryland students and faculty, “I wanted something to drink that was similar to what I would make myself at home. I certainly never put four or five tablespoons of sugar in my tea when I make it at home.”

At Seth’s talk he described what it was like in the early days of the company, brewing tea at home to carry in thermoses to the local Whole Foods and drum up interest in the product. When he got his first order for 15,000 bottles but didn’t yet have any production facilities the company kicked into high gear and started producing… at Seth’s home with a somewhat make-shift bulk tea brewing device. To get his product out into the world, he had to interact with beverage distributors. He described interesting encounters with various distribution groups around the country, some of them involving more curse words than a scene from the Southpark movie. However, since then Seth has taken trips to organic tea farms all over the world to source the fair trade tea leaves that Honest Tea uses in its products. Not to mention, he also has a real office now and state of the art production facilities.

The evolution of a company is an intimate thing, and it was definitely something that Seth communicated in his retelling of how the company has grown. Honest Tea now employs 127 people in Maryland and since the acquisition by Coca-Cola it can now be found in 70,000 outlets (up from 15,000 prior) across the country. Honest Tea’s gross sales also hit a pretty nice high at $71 million in 2010. So then what did I take away from Seth’s visit? An entrepreneur should believe in what his company is doing because it is what drives him to make the business succeed and payoff. It’s certainly nice to see that the trend in the business world today, and in the consumer world for that matter, is moving in the direction of supporting sustainable and socially conscious businesses. For those entrepreneurial minded folks out there who care about their impact and want to make it big, definitely check out the book.

– Gwen Gurley, 1st year Board Member

P.S. Here’s a video that was played during Seth’s talk. For a small company, advertising is incredibly important but difficult to achieve with restricted cash. See how Honest Tea approached this dilemma for a fresh take on “socially responsible business practices.”